Do you believe that inventories are tight?

I have already post a couple times about tight inventories this holiday season (see here and here) but more examples keep coming. Now the New York Times is reporting that luxury retailers are reducing their inventories (Luxury Stores Trim Inventory and Discounts, Nov 18). While they risk missing some sales, they are happy to be selling at full price:

Saks, the chic Manhattan department store, is a prime example. Its inventory is down by double digits compared with last year. That is partly a response to lower demand, of course, but it is also a business strategy aimed at weaning consumers from deep discounts. By carrying fewer goods and selling them at full price, Saks is essentially telling customers: buy it now or live without it.

“Upscale stores want to train the customer that luxury equals exclusivity and that they cannot assume they can wait and they’re able to buy it on sale,” said William S. Taubman, chief operating officer of Taubman Centers, a mall developer and owner. …

Burton M. Tansky, president and chief executive of the Neiman Marcus Group, says he does not think he is retraining consumers. Rather, he said, he is doing what is best for the health of his company. “We’ve told our customers that the availability is less than they’re used to seeing in the stores,” Mr. Tansky said. “We’ve suggested that it would be prudent to shop early.”

Of course, anyone can say that they are running out of stock. It doesn’t necessarily make it so.

That is, if there is a magic word the store could say that will always make the customer buy regardless of available inventory, it would always say the magic word. Customers would eventually realize that talk is cheap, and the word would lose it’s magic. Maybe customers have already realized this:

Some surveys have found that, so far, the prospect of lean inventories is not prompting consumers to hasten their holiday shopping. Shoppers could wait out the retailers until late in the season, in the hope that they will panic and put high-grade merchandise on sale.

If nothing else, some academics have figured this out. My Kellogg colleagues Achal Bassamboo and Gad Allon (who also is responsible for this blog) have a paper that looks at whether customers should believe claims that supplies are tight. The analysis is fairly technical but the punchline is pretty clear: You should be wary when the salesperson says this is the last one in your size.